Benefits accrued from RFID
Radio frequency identification chips are beneficial for the large fashion retailers because they help in keeping track of the stock. Large retailers like Zara have struggled for a long time with keeping track of their inventory, especially in taking stock of different fashion lines. Companies like Zara have to keep up with sales to identify the brands that sell faster, and to establish the languishing fashions.
This helps in deciding which fashions to invest in, and how to arrange their products in the stores to promote the sales of the languishing fashions. RFID chips have been programmed to store information about items, and they make it easier to take stock. As revealed by Zara, the main benefit of using the RFID is its ability to make inventory taking easier and faster. Zara indicates that it took 40 employees around 5 hours to do the job previously, but with the chips, 10 employees can take half the time. This reduction in working hours and employees required for the process translates to a reduction in financial liabilities for the company.
The chips also help in determining the products to restock in the shelves because each sale is electronically transmitted to the systems in the stores, prompting the workers to fill in the products. RFID has replaced the use of bar codes, which need to be scanned one at a time. This process is quite hectic, but the RFID has made it simpler because it allows the inventory-takers to take stock in bulk. Zara also enjoys the efficiency of the system by conducting its inventory-taking every six weeks. The company used to carry out the inventory-taking process twice a year before adopting the RFID system. This has enabled Zara to have over 95% accuracy in its stock taking.
Why Wal-Mart Slowed its use of RFID
Wal-Mart slowed the use of RFID systems because it proved to be ineffective in the warehouses and stores. The company had initially developed a plan to implement the use of radio signals in its warehouses, that the practical application of the system was ineffective. This was likely due to the cost of installing the system. Unlike Zara, Wal-Mart and other warehousing companies could not afford to invest in buying sufficient chips to cover their entire inventory.
The radio signal system proved inefficient for Wal-Mart because they expected it to be as simple as the barcode system. It is also clear that the RFID system requires continual replacement of the products in a store, and this would require a very large team at Wal-Mart, which is not economical. The system is more appropriate for a company that has a limited number of products. In essence, the RFID system cannot be advantageous for a retail company with a large amount of products with faster sales.
The RFID system is best suited for the apparel business because it deals with a limited number of fashion products, and the companies have to know which products are doing well. Wal-Mart only needs a bar code system, which permits its information system to highlight the number of products of different types that are sold on a daily basis. The RFID system did not have any significant benefits for Wal-Mart. In any case, it was a liability to the company.
The cost of installation of the system is quite high as disclosed by Zara, and it needs a company that can respond promptly to the restocking process. Wal-Mart would rather deal with the bar code system because most of its products do not require inventory taking.